Last year,Flynn Company reported a profit of $70,000 when sales totaled $520,000 and the contribution margin ratio was 40%.If fixed expenses increase by $10,000 next year,what amount of sales will be necessary in order for the company to earn a profit of $80,000?

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Quizplus · Accepted Answer

Profit = (CM ratio F1F1F1S1F1F1F10 Sales)- Fixed expenses
$70,000 = (0.40 F1F1F1S1F1F1F10 $520,000)- Fixed expenses
Fixed expenses = (0.40 F1F1F1S1F1F1F10 $520,000)- $70,000
Fixed expenses = $208,000 - $70,000
Fixed expenses = $138,000
Dollar sales to attain a target profit = (Target profit + Fixed expenses)F1F1F1S1F1F1F10 CM ratio
= ($80,000 + $138,000 + $10,000)F1F1F1S1F1F1F10 0.40
= $228,000 F1F1F1S1F1F1F100.40
= $570,000

Last Year,Flynn Company Reported a Profit of $70,000 When Sales